Ballmer Chides Microsoft Over Cloud Revenue Disclosures

“It’s sort of a key metric — if they talk about it as key to the company, they should report it,” Ballmer, who is the company’s biggest individual shareholder, told Bloomberg at the software maker’s annual meeting in Bellevue, Washington.SAN FRANCISCO — While Microsoft’s annual shareholder meeting Wednesday was largely a platform for executives to repeat the company’s mobile- and cloud-first mantra, the lengthy question and answer session that followed dove into the thorny topics of racism and ageism.

Microsoft’s shareholders voted Wednesday to elect the company’s 11 nominated board members and said “yes” on an advisory vote on the company’s executive pay packages.At Microsoft’s annual shareholding conference today, Microsoft CEO Satya Nadella cited diversity progress in relation to the executive team and board of directors.Former Microsoft CEO Steve Ballmer dealt with his fair share of grumbling from investors during his 14 years at the helm, but now the tables have turned. Johnson & Johnson executive Sandra Peterson and former Cisco executive Padmasree Warrior join the company’s governing council, replacing Harvey Mudd College President Maria Klawe, who stepped down after six years.

Margin – a measure of profitability – is important because while gross margins for software are very high, they are far lower for things like hardware and cloud services, Ballmer said. With the addition of the two new directors and the reelection of Dick’s Sporting Goods executive Terri List-Stoll, Microsoft’s board now has three women, The shifts are the latest in a major revamp of the Redmond company’s board.

Bass reports that Ballmer said he’s not happy with the way Microsoft is reporting financial data for its cloud business, arguing the company should release profit margins and sales numbers. Instead, Microsoft talks a lot about its annual run rate, which extrapolates what the annual revenue of the business would be based on current sales numbers. He and Nadella met privately with Jackson on Tuesday. “It’s not just about words, it’s robust action and having a rich dialog about having a culture of inclusiveness,” agreed Nadella during the meeting, which was webcast. Jesse Jackson, a tireless advocate of diversity and inclusion in tech, agrees that Microsoft could do a lot better. “We now urge Microsoft to actively seek out qualified Blacks and Latinos for your next appointments, and want to work with you to identify Board leaders for the future,” Jackson said at the shareholders meeting.

Ballmer said he has discussed the issue with the company and that after almost two years out of the CEO job, he can’t even guess what these numbers are. “We enjoy a regular dialogue with Steve, and welcome his input and feedback, as we do from our other investors.” said Chris Suh, Microsoft’s general manager for investor relations. Last year, across the tech industry, there were only three black people and one Hispanic person sitting on the boards of directors at 20 major tech companies, according to a survey by the Rainbow PUSH Coalition. Ballmer also criticised Nadella’s answer to an audience member questioning the lack of key apps, like one for Starbucks, on the company’s Windows Phone.

Referring to the private conversation he had with the civil rights leader earlier, Nadella said he would look into new areas suggested by Jackson, specifically ethnic representation in advertising as well as allocation of more corporate resources to reach those in the inner city. Jesse Jackson, who planned to speak at the meeting for a second consecutive year, this time to ask the company to commit to targets for adding more diversity to the company’s workforce, among other initiatives. Nadella responded by citing the company’s plan to appeal to Windows developers by allowing them to write universal applications that work on computers, phones and tablets, targeting a larger array of devices than just Microsoft’s handsets that have just a single-digit share of the mobile market. In September, Nadella announced Microsoft would spend $75 million over the next three years to get kids interested in technology through the TEALS program, Technology Education and Literacy in Schools. On a more disappointing note, the company released employee diversity numbers last week that indicated its racial and gender make-up remains essentially unchanged — mostly white and male, echoing most other tech companies — with a notable drop in female employees as a result of its Nokia layoffs. “They’re taking more and more leadership on this issue, and at least it’s all in clear view, they’re not avoiding the subject,” Jackson told USA TODAY after the meeting adjourned.

We will continue the PUSH for real change, and insist that companies set measurable goals, targets and timetables to move the needle.” Nadella responded saying that Microsoft is “very focused” on diversity, and cited the unconscious bias training it has deployed to over 100,000 employees, the diversity of Microsoft’s supplier programs, and accelerator programs to reach minority entrepreneurs. A former senior executive at collapsed Melbourne satellite company NewSat discussed forging a signature on a crucial document required by a US government bank and other lenders before they would release $300 million in funding. Microsoft’s stock (MSFT) has made progress over the calendar year as well, starting at $48, dropping a few times to a low of $40 and currently flirting with $55, giving the company a market cap of $438 billion, third among public tech companies behind Alphabet (formerly Google, $527 billion) and top-seed Apple ($654 billion). The admission, heard on a secret, legally-recorded conversation between the former executive and a NewSat contractor, is the latest development to hit the scandal plagued company which went into administration in April and wiped out thousands of investors.

The shareholders who followed Jackson touched on a range of topics, from why Microsoft had cut a particular program that compensated college students for being product-advocates on campus to borderline tech-help questions about how to use a smartphone to access television content. And in a nod to shareholder concerns, the board emphasized a shift in its pay practices to award executives based on their own and the company’s performance.

The revelation comes as BusinessDay has also obtained documents and photographs which raise further questions about NewSat founder and former chief executive Adrian Ballintine’s use of company funds and transactions involving his Gold Coast Cresta Motor Yachts business. One particularly tense exchange was between a Chinese-American shareholder who started by asking why there weren’t any Chinese board members but concluded by called Smith a “hoodlum” for allegedly asking Microsoft campus police to ban her from the premises after she tried to visit the company’s executives. A series of photographs and text messages indicate Mr Ballintine contrived to have a 2012 business meeting moved from Bangkok to a resort in Phuket in Thailand in order to accompany NewSat’s then investor relations manager, Kahina Koucha, on a holiday. Smith responded that he would take the issue under advisement and quickly moved on to an older man who asked what Microsoft planned to do about the ageist nature of its brand image and products. “I see a lot of grey hairs here (at the meeting), but not many in your commercials,” he said. “Are you dealing with this, besides sexism and racism? BusinessDay can also reveal Mr Ballintine last year arranged a $1 million bridging loan with NewSat director and major shareholder, Singapore businessman Ching Chiat Kwong, for his motor yacht firm.

Are there any games for people 50-plus (age group)?” Nadella’s response: “Well, I’m close to 50 (he’s 48), and I love (the video game) Halo.” The questioner immediately countered: “You gotta appeal to us longer-livers.” Nadella allowed then that “this is a very important topic, we have people of all ages at Microsoft. But when I look at product design, the most important thing is that it’s universal, and not geared to one population or another.” The beginning of the meeting featured presentations by key leadership members. Thompson noted that Microsoft’s three-fold mission is to “reinvent business productivity, grow the intelligent cloud and encourage more personal computing.” Hood reiterated the company’s goal of having its new Windows 10 operating system on 1 billion devices by 2018, and reaching $20 billion for its annualized cloud revenue run rate by the same year (it was $8.2 billion this year).

It is understood that investigators from ASIC have obtained a copy of the recording, which was the subject of email exchanges between key NewSat figures. The former senior NewSat executive can be heard telling a contractor that the company’s entire project could fall without the signature of a representative from a Pakistan customer called Quicklinks. In addition to Mr Ching’s $1 million loan for Cresta, a director of Baillieu Holst stockbroking firm, Stephen Macaw, is also identified as having a $350,000 stake in Cresta, according to an email written by Mr Ballintine in 2013. At that time, Mr Macaw was leading a capital raising for NewSat and in October 2013 he unlawfully traded 17 million NewSat shares, an event which earned millions of dollars for an entity associated with his brother and caused a sharp drop in NewSat’s share price. Former NewSat insiders have also alleged that company funds were used to pay for Cresta’s legal costs and that the wife of Cresta’s chief financial officer, Jason Cullen, was also on the NewSat payroll under her maiden name.

The demise of NewSat, which once had former prime minister Bob Hawke on the books as a key spruiker, has been one of Australia’s most spectacular recent corporate collapses. In August, BusinessDay published videos taken from inside the NewSat boardroom last year in which chairman Richard Green rose from his chair during an argument with another director and said he was considering punching him. Businessday also earlier this year revealed how a secret forensic accountant’s report given to NewSat’s financiers found “potential unlawful conduct” and “serious management failings”. The EXIM Bank, which has had its funding stopped by the US Congress largely due to the NewSat debacle, continues to investigate transactions with the Australian company for evidence of illegal conduct.